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$ 15,990,000 $ 16,635,000 Required: 1. Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculat Round your answer to 2 decimal places.) Target cost

$ 15,990,000 $ 16,635,000 Required: 1. Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculat Round your answer to 2 decimal places.) Target cost

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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MaxiDrive manufactures a wide variety of parts for recreational boating, including a gear and driveshaft part for high- powered outboard boat engines. Original equipment manufacturers such as Mercury and Honda purchase the components for use in large, powerful outboards. The part sells for $700, and sales volume averages 35,000 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $678. The market is very competitive, and MaxiDrive realizes it must meet the new price or lose significant market share. Management has begun paying closer attention to costs and has reconfirmed the current existing standard costs. The controller then assembled the following cost and usage data for the most recent year for MaxiDrive's production of 35,000 units: Budgeted Quantity Actual Direct materials Budgeted Cost Quantity $ 7,500,000 Actual Cost $ 8,000,000 Direct labor 2,660,000 3,125,000 Indirect labor 2,900,000 Inspection (hours and cost) 1,320 500,000 2,000 Materials handling (number of purchases and cost) Machine setups (number and cost) 6,500 1,000,000 4,450 2,400 1,250,000 2,500 Returns and rework (number of times and cost) 500 180,000 $ 15,990,000 700 2,620,000 450,000 985,000 1,225,000 230,000 $ 16,635,000 Required: 1. Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Target cost
Transcribed Image Text:MaxiDrive manufactures a wide variety of parts for recreational boating, including a gear and driveshaft part for high- powered outboard boat engines. Original equipment manufacturers such as Mercury and Honda purchase the components for use in large, powerful outboards. The part sells for $700, and sales volume averages 35,000 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $678. The market is very competitive, and MaxiDrive realizes it must meet the new price or lose significant market share. Management has begun paying closer attention to costs and has reconfirmed the current existing standard costs. The controller then assembled the following cost and usage data for the most recent year for MaxiDrive's production of 35,000 units: Budgeted Quantity Actual Direct materials Budgeted Cost Quantity $ 7,500,000 Actual Cost $ 8,000,000 Direct labor 2,660,000 3,125,000 Indirect labor 2,900,000 Inspection (hours and cost) 1,320 500,000 2,000 Materials handling (number of purchases and cost) Machine setups (number and cost) 6,500 1,000,000 4,450 2,400 1,250,000 2,500 Returns and rework (number of times and cost) 500 180,000 $ 15,990,000 700 2,620,000 450,000 985,000 1,225,000 230,000 $ 16,635,000 Required: 1. Calculate the target cost for maintaining current market share and profitability. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Target cost
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